The soaring PCE inflation data in May 2026 has an impact on the overall market one ️⃣ The PCE data unexpectedly rebounded in May 2026 (overall 4.1%, core 3.4%), exceeding expectations and directly shattering market expectations of interest rate cuts. The rebound in inflation strengthens the resilience of price pressure, and the Federal Reserve will maintain high interest rates for a longer period of time. The high cost of funds has put pressure on overvalued technology stocks, causing major institutions to create panic, break through key support, clean up floating funds, and achieve a rotation of funds from growth stocks to traditional defense sectors. two ️⃣ Short term judgment (1-4 weeks): high volatility, weak trend consolidation After the data was released, the initial market reaction was mixed (some futures remained stable due to "meeting expectations"+some financial reports boosting), but technology indices such as Nasdaq and Philadelphia Semiconductor still face pressure, and the leading decline pattern of -0.91%, -1.32%, and -2.21% may repeat. On a technical level, the breakdown of key support can easily trigger a stop loss chain reaction, leading to an increase in volatility. Geopolitical factors (energy prices) are strengthening in sync with core inflation, coupled with a reassessment of the Federal Reserve's policy path, resulting in a decrease in short-term risk appetite. High Beta assets (including cryptocurrencies) are under simultaneous pressure. It is recommended to control positions and avoid chasing after gains and killing losses. three ️⃣ Mid term outlook (1-3 months): Style rotation dominant, value/defense dominant The core lies in the long-term high cost of capital → withdrawal of high valuation technology stocks → rotation to traditional sectors. Inflation stickiness challenges the soft landing narrative, and the "higher and longer" interest rates (even the possibility of a rate hike in September) will continue to suppress the valuation of high PE growth stocks. Funds flow into defense/value sectors such as energy, finance, and essential consumption, which have strong anti inflation capabilities and low valuations. These sectors have strong pricing power or benefit from improved net interest margins. The use of negative inflation by institutions to 'suppress' is actually a process of rebalancing and attracting funds at a low level. The overall economy still has resilience (strong consumer spending), not a systemic bear market, but a structural adjustment. four ️⃣ The impact on cryptocurrency Cryptocurrency is highly correlated with NASDAQ and technology stocks, and faces short-term adjustment pressure, especially for high valuation narrative driven varieties. Bitcoin and other cryptocurrencies may test key support, while altcoins have greater volatility. But in the medium to long term, there is still room for improvement if the Federal Reserve's path becomes clear or liquidity improves. Predicting the market (Fed decisions, macro events) can serve as a game tool. Fixed investment investors can view such fluctuations as a "slow is fast" window for adding positions. five ️⃣ Key observation indicators and risk opportunities Focus on tracking June inflation/employment data, FOMC meetings, and geopolitical trends in oil prices. If the subsequent data falls back and the expectation of interest rate cuts returns, technology is expected to rebound; If the stickiness persists, the wheel movement will deepen. Optimistic scenario: Resilient economy+long-term trend support from AI, high-quality assets provide entry opportunities; Pessimistic scenario: stubborn inflation and weakened employment, triggering a broader risk off. Overall judgment: Currently in a period of policy expectation reassessment and style switching. Short term fluctuations intensify and growth is under pressure; Mid term rotation has an advantage and more resilient defensive value; Long term depends on data validation. Non systematic collapse, but a healthy adjustment in a high interest rate environment. Seize the opportunity of rotation and avoid the risk of high-level crowding in order to gain an advantage in fluctuations.